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The Huron Expositor, 1982-08-25, Page 27Appl BY ALAN SCOTT Ag, Rep. You'd like to apply for the Provincial Government's In- terest Assistance Program. However, you've heard that it will cost money to have someone prepare an appli- cation. You've also heard that a tremendous amount of detail must go into an applica- tion. Both statements could he true or they could be misleading. You require a Net Worth Statement, an Accrual -Ex- pense Statement for 1981 and a Projected Plan for 1982. The Net Worth and the Projection are easy if you prepare an annual projection for your bank. You'll simply need to photocopy the pages and include them with your appli- cation. The Accrual Statement is harder to come by. Some hunks do not require this information with their pro- jection. 'We have a useful conversion sheet at our office, You can fill in certain figures from your Income Tax State- ment and add changes in inventory, payables and re- ceivables. The end result is an, Accrual Statement. There's one fly in the oin4 neem. Most people don't know the beginning and end- ing figures for inventory. d payables and receivables. So the Accrual Statement could well be a problem if you haven't good records, You II also have problems if you don't prepare an Annual Statement for your bank, and if your year end financial position is measured with a cash statement for income tax, In this case, you'll likely have to spend a good sum to, make an applica- tion. Is the required information just government red tape or is it information that's useful in making business decisions? Are there other benefits over and above the 5% rebate? Let's start with the Accrual Statement. Evaluating a bus- iness on a cash system can be dangerous. les alright. if you've never had outstanding payables or receivables at the year end, and if your inven- tory is consistent every year. However, it's highly unreli- able for people who are expanding or those in cash crop or feeder e operations. Your Cash Statement is just completely worthless for evaluating business progress if you sold 100 head of steers and didn't replace them. It has a similar weakness in a situation where $20,000. worth of expenses weren't included in the totals for the on't cop out year, because they weren't paid at the end off the record period. Some people dislike pre- paring a Net Worth State- ment because the values - involve some guesswork. Others readily prepare a Net Worth with optimistic values. The Net Worth shows the proprietor's equity or propor- tion owned at that point in time. An Annual Net Worth with consistent value shows whether or not the business person is gaining or losing ground. It's time to start asking questions if ' equity declines by $100,000. in the twelve month period. The projection involves the most work. You have to look at crop and feed costs as well as complete a feed balance to determine how much pur- chased feed is needed in addition to what's grown at home. You have to estimate production per sow or cow and the average daily gain of feeder animals. Some shy away from this exercise be- cause you don't know how production will work out or you can never tell about market prices. You can also work it out on the optimistic side and then put it away wird forget about 'it and let your lender worry about whether or not your optimism come New beef protection program is in place BY .1.G. BUCHANAN-SMITH Associate Professor Dept. of Animal and Poultry. Service University of Cueloh A recent default in pay• meat by a livestock dealer in Southwestern Ontario affect- ed four community sale oper- ations and numerous pro- ducers. Government officials and police presently are in- cesligatmg the bankruptcy of Stewart McIntyre and. in the meantime, O.C.A. has pro• vided financial assistance to procure legal aid for creditors of both Stewart McIntyre and the Chatham Sales Barn. This incidence has brought the iswe of Financial Pro- tection to the foreground once agair The O.('.A."along with r presen alive% of the Ontar- m I.i%estock Markets Associa• lion and the Canada meat ('oun(II. ha%c hecn carrying out discussions and making representations to the Ontar- ui Go‘ ern mem for several cars on dee eloping an indus• tri wide program which woul(1 reduce the risk of default to producers, sale operators and dealers through establishing a fund Ei w hich could be drawn upon in the event of default. The Beef Cattle Financial Protection Program• intro- duced by OMAF. will go into effect on August I st and will include the following: I I compulsory licensing of all purchasers of slaughter and feeder cattle with excep- tion of producers who sell to other producers in the normal cause of their farming opera• tion: 2) a provision requiring that all payments be made within 48 hours; 3)'establishment of a fund which would provide comp- ensation for sellers of beef cattle in cases where there is a default on payments by the licensed purchaser; and 4) compensation of 90% of any losses resulting from payment default. The compulsory licensing of livestock dealers repre• vents a shift in government policy and was supported by cattlemen several years ago. The prompt payment require• merit has long been consider - cd by cattlemen to be the backbone of such a program and will serve as a means of true. Some managers work their plan. They compare their projection to what actually happens. They then have some actual figures based on their own operation for the next projection. In short, they can fine tune future projec- tions because they know what's happening in their operation. As a result, they have factual answers for questions asked by lenders' and O.M.A.F, people. An Interest Assistance Ap- plication brings out other interesting points. How much principal and interest must be paid each year? Can the production unit handle such repayments? How much. principal is being paid off each year? How many dollars are left over after the appli- cant has paid normal operat- ing expenses, principal and interest payments, and fam- ily living? Are cash deficits offset by inventory increases? What is the value of the products produced on the farm? is the value of produc- tion more or less than the cost of production? 'The 1982 Interest Assist- ance application is designed to make managers think about their business. Several people have remarked they learned a tremendous amount about their business by preparing their own appli- cation. Some people -have, by necessity, had to ask advisors to make out their application. 1 hope that these people will ask the preparer to go over and interpret and ask ques- tions where questions need to be asked. Some people say "I'm not interested", or "1 haven't time", or "I'm not smart enough". That's a cop-out. Everyone's timid to tackle a new area but that doesn't mean you haven't the ability -- particularly with some coach- ing from your advisor. There are people with the same or less intelligence who have taken up the challenge and understand the figures of their business. "We're hearing that the 1980s will be a • period of improving our knowledge of farm business 'management, Lenders are hinting that they will have less patience with those that cannot supply factual information on busi- ness progress. The Interest Assistance Program can mean a 5% rebate on floating rate money. It can also be a start for a better understand- ing of your farm business. THE HURON EXPOSITOR AUGUST 25, 1982 — A19 WEATHER CONDITIONS couldn't be better for area farmers in the midst of harvesting oats and barley. Although wet weather of two years ago is not prevalent, farmers now have to deal with low grain prices. In a months time, combines will be converted to harvest beans. The cool weather of June has had little effect on tthe bean crops. (Wassink photo) Good weather -so far reducing the degree of ex• posure to default, Producers, however, will be required to report any instance of late payment in order to make a claim against the assurance fund. Concerns remain in the industry about the monitoring of prompt payment and the steps which should be taken by prdgram administrators to minimize exposure and claims against the fund. While the issue of the size of the contribution to 'he fund has been difficult to olvc within the industry. e Ontario Cattlemen's As• sociation supports the Mini- stry--h-having a compulsory contribution to the fund on every transaction involving a licenced dealer of $.20 per head by each of the seller. agent and buyer. It is esti• mated that this will generate in excess of $I million an- nually, and. and it is deemed that an adequate reserve has been established, contribu• tions will he suspended. The Ontario Government will pro- vide a grant of $25.000 to initiate the fund. will provide for a loan of up'to 5250.000 if necessary and a guarantee to the fund of 5I million if necessary, 4111.1161.11111/4111141.111111111.41.1.1111111111111.1111115111401, 1 Second-hand appliances don't get better... just older. ODMA SEAFORTH PRESENTING AN EXCLUSIVE OFFER FOR OUR SHOPPERS: iET WA/ ATKNECHTEL AIL FOOD STORES KNECHTEL In Appreciation For Your Patronage.' 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